HP faces losses of millions of pounds by refunding retailers who are slashing prices of its TouchPad tablet, which was discontinued on Friday after being on sale for just 48 days.

Dixons Stores Group (DSG) and other retailers are cutting prices on the TouchPad from £350 to £89 for the low-end 16GB model, and £450 to £115 for the 32GB version, in what is effectively a closing-down sale for the range of tablets – which HP had been positioning as an enterprise-focused product to rival Apple's iPad tablet, which sells for the same price.

But on Friday the head of HP, Léo Apotheker, announced that the TouchPad would no longer be manufactured, as the company shifted towards a service-focused drive in which it is buying the UK data mining company Autonomy and seeking to sell off its PC division.

HP spent $1.2bn buying Palm, whose WebOS software powers the TouchPad, in April 2010. Now it is reckoned to have set aside up to $100m to compensate retailers who are selling their stocks of the discontinued tablet at around the wholesale price. Customers who bought TouchPads before the announcement will be able to get refunds of the difference in price, according to a spokesman for DSG.

The decision to stop making the TouchPad leaves open a slim chance that WebOS will be licensed by other hardware manufacturers, but industry sentiment does not suggest any strong interest, with the principal rivals to Apple's iPad using Google's free Android mobile operating system.

A DSG spokesman declined to say how many TouchPads it had sold compared with the iPad: "the iPad 2 remains our best-selling tablet by some distance," he commented. Since the iPad was launched in March 2010, Apple has sold more than 29m iPads.

TouchPad stocks in Australia and New Zealand sold out as prices were slashed to bargain-basement prices, and US stores which took up the opportunity also sold thousands.